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Tax Terminologies

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Tax Terminologies

Tax Compliance

1 Tax Compliance refers to a taxpayers’ (business or individual) decision to observe tax laws and regulations- by filing returns and paying tax timely and accurately. Overall, tax compliance involves being aware of and observing the tax laws and requirements set forth by the Parliament of the Republic of Ghana – which are being administered by the Ghana Revenue Authority.

Any individual or business who fails to; file their tax return by due dates, report all earnings, accurately calculate taxes owed and pay taxes according to tax laws of Ghana is considered noncompliant.

Noncompliance is an offense and can come with significant consequences such as fines and other penalties for individuals or businesses as stipulated in the tax laws.

NB: Tax legislations are regularly being amended and changed. Businesses and individuals must adjust their tax reporting and filing according to new laws.

Tax Avoidance

2 Tax avoidance is the legal use of tax laws to reduce one’s tax burden. Tax avoidance mainly involves bending the rules of the tax system to gain a tax advantage. Although tax avoidance can be viewed as forms of tax noncompliance as it embroils a range of activities that intend to subvert the country’s tax system, it is however a legitimate act and therefore not considered a tax offence.

Tax Evasion

3This is any illegitimate or criminal activity carried out by individuals, corporations, trusts and any other entity or body to deliberately misrepresent the true state of their affairs to the Ghana Revenue Authorities to reduce their tax liability. This illegal act of tax evasion includes making false declarations on tax returns, misrepresentation of trading records and or books of accounts (declaring less income, profits or gains than the amounts actually earned, or overstating deductions), and any act of dishonesty regarding a person’s taxation to the Ghana Revenue Authority.

Tax evasion is a criminal offence and it is punishable by law.

Assessment

4

Assessment means a determination of the amount of tax liability made under a tax law, whether by the Commissioner-General or by way of self-assessment, and includes the matters identified in the Second Schedule of the Revenue Administration Act, 2020 (Act 1029).

Self-Assessment

5

Self-assessment means an original assessment under a tax law that is occasioned by a person filing a tax return rather than by the Commissioner-General making an assessment and includes the matters identified in the Second Schedule of the Revenue Administration Act, 2020 (Act 1029).

Provisional Assessment

5Under the provisional assessment scheme, the GRA will provide an assessment to a taxpayer based on our estimation of what the possible taxes payable will be. If agreed upon, the taxpayer on which the assessment is served will then have to settle these amounts on quarterly instalment. Provisional assessment is paid on account and therefore the taxpayer would net off any under or over payments at the end of the year when the Corporate Income Tax or Personal Income Tax returns are submitted to the Authority. Any withholding tax paid either from a taxpayer’s customers or the 1% import duty will also be taken into account in the net off at the end of year.

Tax Amnesty

6Tax amnesty is the pardoning of tax obligations by a government for remorseful tax defaulters. The forgiveness of tax obligations ranges from a reduction in the payment of actual taxes owed, a complete exemption from the payment of taxes for a specified period and the waiving of interest and penalties.

Ghana Revenue Authority in 2018 carried out a Tax Amnesty program. The program included tax measures to:

  1. Exempt registered taxpayers from penalties and interest if they submit outstanding tax returns and pay the relevant tax; and
  2. Exempt taxpayers that aren’t registered from tax, penalties, and interest if they register and submit outstanding income tax returns for 2014-2016.

 The Tax Amnesty program was instituted in line with the Tax Amnesty Act 2017, (Act 955)

File

6

File, in relation to a document, is the process of submitting, lodging or furnishing the document (a legal document, application, or charge) to be placed on record by the appropriate authority.

Taxable Person

7

Taxable Person is a person who is registered for the purposes of the VAT Act or is required to register under sections 6 to 16 of the VAT Act 2013, (Act 870).

Taxable Supply

8

Except as otherwise provided in the VAT Act 2013 (Act 870) or Regulations, a taxable supply is a supply of goods or services made by a taxable person for consideration, other than an exempt supply, in the course of, or as part of taxable activity carried on by a taxable person.

Taxable Activity

9

Taxable Activity is an activity which is carried on by a person in the country, or partly in the country, whether or not for monetary profit, that involves or is intended to involve, in whole or in part, the supply of goods or services to another person for consideration.

A taxable activity includes:

(a) An activity of a local authority or unincorporated association or body that involves, in whole or in part, the supply of goods or services to another person for consideration;

(b) The processing of data or supply of information or similar service;

(c) The supply of staff;

(d) The acceptance of a wager or stake in any form of betting or gaming, including lotteries and gaming machines;

(e) The making of gifts or loans of goods;

(f) The leasing or letting of goods on hire;

(g) The appropriation of goods or services for personal use or consumption by the taxable person or by any other person;

(h) The sale, transfer, assignment or licensing of patents, copyrights, trademarks, computer software and other proprietary information; and

(i) The export of non-traditional products.

A supply is considered to be a supply for consideration where the supplier is directly or indirectly entitled to receive payment wholly or partly in money or in kind from the person to whom the supply is made or from any other person, and includes

(a) A supply made between related persons for no consideration;

(b) A supply of goods for use only as trade samples; or

(c) A supply referred to in section 21 to 23 of VAT Act 2013 (Act 870)

A supply is part of a taxable activity of a person if the supply is made by that person as part of or incidental to any economic activity the person conducts.

Where an owner of goods enters into a contract with another person to process or treat the goods of the owner, the delivery of the goods to the owner or the agent of the owner shall be treated as a supply of goods by the person processing or treating the goods.

VAT Act 2013 (Act 870) section 5

Consideration

10

Consideration in relation to a supply of goods or services and an import of services, includes;

 

  1. The total amount in money or in kind paid or payable for the supply by any person, directly or indirectly, and
  2. Duties, levies, fees and charges paid or payable on, or by reason of the supply or import of services; other than tax;

and is reduced by a deposit other than a deposit on a returnable container and by any discount or rebates allowed and accounted for at the time of the supply or import of services.

VAT Act 2013 (Act 870)

Traditional & Non - Traditional Export

11

Traditional Exports are defined as any of the below:

 

  1. Cocoa beans;
  2. Lumber and logs;
  3. Unprocessed gold or other minerals;
  4. Electricity; and
  5. Petroleum, crude oil or natural gas.

Non Traditional Export are any exports not listed above.

Output Tax

12

Output Tax means the tax chargeable in respect of a supply of goods and services made in the country other than exempt goods or services.

Input Tax

13

Input tax means tax payable by a taxable person in respect of an acquisition of a taxable supply of goods and services or taxable import.

Tax Invoice

14

Tax Invoice means an invoice issued on a supply of taxable goods and services in accordance with the VAT Act and the Regulations made under the Act.

Tax Period

15
Tax Period is defined as one calendar month.

Credit Agreement

16

Credit Agreement is defined as a for purchase agreement or finance lease.

High Net Worth

17The High Net Worth Office (HNWO) is an administrative tool of the Ghana Revenue Authority (GRA) to provide premium compliance assistance to taxpayers at the top of the income scale who fit the high net worth individual criteria. This criterion is determined by GRA after an evaluation of the individual’s books. The Office was established in August 2017 through an initiative in GRA’s second strategic plan.

Services provided by the HNWO include:

  • Expedited processing and issuance of tax clearance certificates
  • Pre-filing assistance and the opportunity to file returns and make payments electronically
  • Assistance with premium compliance
  • Recognition of compliance through award schemes and certification
  • Professional and courteous service

Obligations of a High Net Worth Individual:

  • Registration for all relevant tax types
  • File Personal Income Tax (PIT) returns on time
  • Make tax payments on time
  • Make complete and accurate disclosures of all relevant information

Basis Period

18 Basis Period means the calendar year from 1st January to 31st December.

The basis period of a person is,

(a) In the case of an individual or a partnership, the calendar year; and

(b) In the case of a company or a trust, the accounting year of the company or the trust.

The Commissioner-General may, on application by a trust or company, approve a change of  the accounting year of the trust or company on the terms and conditions that the Commissioner General may approve.

The Commissioner-General may also revoke an approval if the trust or company fails to comply with a condition attached to the approval.

Income Tax Act 2015 (Act 896) Section 18 subsection 3 and 4

Resident Person

19An individual is recognized as a Resident Person in Ghana for a year of assessment if that individual is

(a) A citizen. ( Who  does not have a permanent home outside of the country and live in that home for the whole of that year)

(b) Present in the country during that year for an aggregate period of one hundred and eighty-three (183) days or more in any twelve-month period that commences or ends during that year;

(c) An employee or an official of the Government of Ghana posted abroad during that year; or

(d) A citizen who is temporarily absent from the country for a period of not more than three hundred and sixty-five (365) continuous days, where that citizen has a permanent home in Ghana.

Income Tax Act 2015 (Act 896) Section 101